McCain May Stumble With Focus on `Joe the Plumber' (Update2)

By Ryan J. Donmoyer and Kristin Jensen

Oct. 17 (Bloomberg) -- John McCain's bid to shore up his poll numbers by highlighting ``Joe the plumber'' may backfire.

Samuel J. Wurzelbacher, the Toledo plumber who criticized the tax proposals of Democratic nominee Barack Obama, owes back taxes, isn't licensed or registered in Ohio and would fare only slightly better under McCain's tax agenda than under Obama's even if his income soared.

McCain this week thrust Wurzelbacher into the national spotlight as a symbol of overtaxed small-business owners after Obama opened clear leads in many states. Analysts said Wurzelbacher's circumstances have muddled McCain's effort to profit politically from the tax issue, making it unlikely ``Joe the plumber'' will have any more long-term benefit for his campaign than did the selection of Alaska Governor Sarah Palin as his running mate.

``Joe the plumber will have the same trajectory as Sarah Palin, but it will be tracked in hours rather than weeks,'' said Thomas Mann, a scholar at Washington's Brookings Institution.

During the last presidential debate, Oct. 15, McCain said that what Obama would ``do to `Joe the plumber' and millions more like him is have their taxes increased and not be able to realize the American dream of owning their own business.''

The problem for McCain, tax analysts said, is that the underlying premise that Wurzelbacher would face higher taxes under Obama is neither true nor typical of how the vast majority of small businesses would fare.

Buy a Business

Wurzelbacher told Obama Oct. 12 as the Illinois senator canvassed his neighborhood that he was about to buy a business that earns as much as $280,000 a year.

``Do you believe in the American dream?'' Wurzelbacher asked Obama, citing the Democrat's proposed tax rate increase for Americans earning more than $250,000. ``I'm being taxed more and more for fulfilling the American dream.''

He also asked Obama about instituting a flat tax, which Obama said he opposed because it would concentrate the tax savings in upper-income households and he wanted to ``spread the wealth around,'' a comment that has been criticized by conservative commentators.

Wurzelbacher hasn't paid the taxes he already owes, according to the state of Ohio, which placed a tax lien against him for $1,182.98 on Jan. 26, 2007, that is still active. A second judgment against him was filed in March 2007 by St. Charles Mercy Hospital for $1,261, records show.

The company McCain said the plumber wants to buy has annual sales of $510,000, according to an analysis by Dun & Bradstreet. That makes it unlikely that Wurzelbacher's purchase would give him a taxable income of more than $200,000 -- leaving him unaffected by Obama's proposal to roll back tax breaks for those earning more than $250,000, said Steven Bankler, a certified public accountant in San Antonio, who counts plumbers and other trade professionals as his clients.

Few Businesses Affected

Few such small businesses have enough income to be affected by Obama's tax changes, Bankler said.

One other problem in making Wurzelbacher a symbol of the overtaxed: he would pay just $773 more in taxes under Obama's plan than McCain's if he did earn an adjusted gross income of $280,000, according to an analysis by the Tax Foundation, a Washington research group that is critical of high taxes.

Earning that much would make Wurzelbacher very unusual among small businesses. According to the Internal Revenue Service, most small businesses organize in ways that allow their owners to pay taxes at personal rates rather than as corporations, which impose a second layer of taxes. Almost 95 percent of 21.5 million owners of small businesses who file as sole proprietors had receipts under $100,000 in 2007.

Another 4 million businesses organize as so-called subchapter S corporations, according to IRS data; less than 5 percent of them earn more than $200,000.

`No Joe Six-Pack'

If Wurzelbacher managed to earn $280,000, ``he's not an average Joe Six-Pack,'' said Gerald Prante, a senior economist at the Tax Foundation.

``Rather than a game-changing blow for the McCain campaign, `Joe the plumber' is turning into a bad case of blowback,'' said Rogan Kersh, a public service professor at New York University.

Still, McCain is making an appeal to the white working class, a demographic ``disproportionately represented in many swing states,'' said Karlyn Bowman, an analyst at Washington's American Enterprise Institute. ``That's Joe's group.''

The tax lien was filed in January 2007, six months after the state certified a delinquency for the taxes, said Ray Ann Estep, section chief for revenue-recovery services for the Ohio attorney general.

``Unfortunately, sometimes people don't resolve their debts as quickly as we would like them to,'' she said.

No License

Wurzelbacher doesn't have a plumber's license and isn't registered as a plumber in Ohio, the Toledo Blade reported on its Web site yesterday. His employer has a state plumbing license, the newspaper said.

Before living in Ohio, Wurzelbacher was a resident of Mesa, Arizona, in McCain's home state, according to property records.

McCain gave Wurzelbacher an apology yesterday for throwing him into the spotlight.

``Joe, if you're watching, I'm sorry,'' McCain said on CBS Corp.'s ``Late Show'' hosted by David Letterman. ``But from what I've read, and I have not talked to him, but from what I've read, he's taken it pretty well.''

To contact the reporter on this story: Ryan J. Donmoyer in Washington at o rdonmoyer@bloomberg.net Kristin Jensen in Washington at kjensen@bloomberg.net

Last Updated: October 17, 2008 13:36 EDT

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